Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Impinj Inc (NASDAQ:PI) achieved its fourth consecutive year of double-digit revenue growth, setting a new annual revenue record.
• The company's financial unit volumes grew by 34% over 2023, indicating strong market demand.
• Impinj Inc (NASDAQ:PI) reported record annual adjusted EBITDA and free cash flow, driven by top-line growth and strong operating leverage.
• The launch of Impinj Gen 2 X has been well-received, with top reader partners already deploying it, enhancing performance and security of RAIN systems.
• The company is directly engaged with two large grocery chains, indicating potential for significant future growth in the food sector.

Negative Points

• Impinj Inc (NASDAQ:PI) faced headwinds at the end of the fourth quarter, including geopolitical uncertainty and tariffs, affecting partner bookings.
• The company anticipates a sequential decline in endpoint IC revenue in the first quarter of 2025 due to excess inventory and lack of large new program ramps.
• Aggressive label price shopping and shorter ordering cycles have disrupted partner bookings and delayed orders.
• The first quarter of 2025 is expected to be impacted by partners having excess endpoint IC inventory, leading to rescheduled orders.
• Impinj Inc (NASDAQ:PI) expects gross margin to decline modestly in the first quarter of 2025, marking the low point for the year.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with PI.

Q: Can you explain the timing and reasons behind the inventory build-up and push-outs experienced in Q4 2024? A: (CFO) The inventory build-up was due to a mix of demand and timing, with demand being the larger factor. Our partners expected stronger demand entering 2025, which did not materialize as anticipated. Additionally, aggressive label price shopping and changes in inlay supplier mix contributed to the inventory build-up. We are now seeing shorter lead times and reduced inventory levels from our partners.

Q: How does this inventory correction compare to previous ones, and what is the expected recovery timeline? A: (CEO) We took swift action upon noticing the correction in Q4. While we are not predicting the exact duration, we are actively working with partners to reduce excess inventory. We believe we are better positioned this time with our seasoned team and strong market offerings like Gen 2 X and M800. We expect to accelerate out of this correction but are not providing a specific timeline.

Q: How many weeks of excess inventory do you have, and is it concentrated in specific areas? A: (CFO) We have a few weeks of excess inventory, primarily concentrated in logistics due to changes in demand from our second large logistics provider.

Q: Can you provide more details on the aggressive price shopping and its impact on ASPs? A: (CFO) The aggressive price shopping is due to overcapacity in the market, leading to competitive dynamics at the label level. This has resulted in delayed orders. We expect ASPs to decrease as the M800, a lower-priced SKU, ramps up. However, we anticipate gross margin improvement due to the lower cost of M800.

Q: What is the outlook for large program ramps in 2025, and how does the pipeline look? A: (CEO) We have a strong enterprise pipeline with opportunities in food and other sectors. However, we are currently in a lull with no new Fortune 100 companies entering the market in the first half of 2025. We expect strong growth in the future as these opportunities materialize.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.